Tax-Sheltered Annuity Required Minimum Distribution Rules

Required minimum distributions from a 403(b) plan must begin by April 1 of the year after you turn 73, and each year’s withdrawal is calculated by dividing your prior year-end balance by the distribution period from the IRS Uniform Lifetime Table. Miss the deadline and the IRS charges a 25% excise tax on whatever you should have withdrawn but didn’t. The 403(b) rules mostly track the general RMD framework, but a few features specific to tax-sheltered annuities can either help you or trip you up: aggregation across multiple 403(b) accounts, a grandfathered pre-1987 balance, a still-working deferral, and the fact that qualified charitable distributions cannot come directly from a 403(b).

When You Have to Start

The starting age is 73 under the SECURE 2.0 Act.¹ Your required beginning date for the first distribution is April 1 of the calendar year after the year you turn 73. Turn 73 in 2025 and you have until April 1, 2026, to take that first withdrawal. Every RMD after the first is due by December 31 of its own year. The age rises again to 75 starting in 2033 for people born in 1960 or later; if you were born before 1960, 73 is your number.

Waiting until the April 1 deadline for the first RMD creates a predictable tax problem. You end up taking two RMDs in the same calendar year: the deferred first-year amount by April 1 and the current-year amount by December 31. Both hit that year’s return as ordinary income, which can push you into a higher bracket, raise your Medicare Part B and D premiums, and increase the taxable share of your Social Security benefits. Taking the first RMD in the year you actually turn 73 avoids the pileup.

How to Calculate the Annual Amount

Take the 403(b) account balance as of December 31 of the prior year. Divide by the distribution period from the IRS Uniform Lifetime Table for your age on December 31 of the current year.² That’s your minimum.

A 74-year-old with $500,000 in the account on the prior December 31 looks up 25.5 (the current distribution period at age 74) and divides. The RMD is roughly $19,608. You can always take more, but the extra doesn’t carry forward against a future year’s requirement.

One exception. If your sole primary beneficiary is a spouse who is more than 10 years younger than you, use the Joint Life and Last Survivor Expectancy Table instead. The distribution period is longer and the annual withdrawal is smaller.²

The Still-Working Exception

If you’re still employed by the organization that sponsors your 403(b), you can delay RMDs from that plan until the year you actually retire, even if you’re well past 73.¹ Once you retire, the first RMD is due by April 1 of the following year, and each subsequent one by December 31.

This exception disappears if you own more than 5% of the sponsoring employer.¹ A 5% owner starts RMDs at 73 regardless of employment. For public school teachers and most nonprofit employees the ownership test rarely matters, but it can catch employees of smaller tax-exempt organizations.

The deferral only covers the current employer’s plan. A 403(b) left behind at a former employer, or any IRA you hold, still follows the standard age-73 timeline while you keep working.

Aggregating Multiple 403(b) Accounts

Own more than one 403(b)? Calculate the RMD for each account separately using that account’s prior-year-end balance. Then you can pull the entire combined amount out of a single 403(b), or split it among them in any proportion.³

That flexibility stops at the 403(b) door. You can’t cover a 403(b) RMD by pulling from an IRA, and you can’t cover an IRA RMD from a 403(b). Each account category keeps its own ledger.³ And 401(k) plans don’t allow aggregation at all: each 401(k)’s RMD must come from that 401(k).

Pre-1987 Balances

Long-tenured 403(b) participants may have contributions made before January 1, 1987, sitting in the account. If the plan administrator has separately tracked those amounts, the pre-1987 contributions themselves are excluded from the standard age-73 RMD calculation.¹ Earnings and gains on those contributions are not grandfathered and follow the normal rules.

The grandfathered pre-1987 portion doesn’t have to come out until December 31 of the year you turn 75, or, if later, April 1 of the year after you retire.¹ The exclusion depends entirely on the plan’s recordkeeping. If separate accounting was never maintained, you don’t get the treatment. Rolling pre-1987 money into an IRA or a different plan type also strips the grandfathering, pulling the whole balance back into standard RMD rules.

Roth 403(b) Accounts No Longer Need Lifetime RMDs

Before 2024, Roth 403(b) accounts owed lifetime RMDs even though Roth IRAs did not. Section 325 of the SECURE 2.0 Act ended that requirement starting with the 2024 tax year.⁴ If you hold a designated Roth 403(b), you don’t take RMDs from it during your lifetime.¹ The account can keep growing tax-free, which helps if you don’t need the money for expenses.

Qualified Charitable Distributions Don’t Work Directly from a 403(b)

A qualified charitable distribution sends money straight from a retirement account to a qualifying charity, satisfying the RMD without the withdrawal counting as taxable income. In 2026 the QCD limit is $111,000 per person.⁵

Here’s the boundary: QCDs can only come from IRAs. Not from 403(b) plans, not from 401(k)s, not from any other employer-sponsored account.⁵ To use the strategy with 403(b) money, you’d roll funds into a traditional IRA and make the QCD from there. Weigh the benefit carefully if any of that money is pre-1987, because moving it into an IRA ends the grandfathered deferral for good.

What Happens if You Miss an RMD

Withdraw less than the full RMD by the deadline and the IRS charges a 25% excise tax on the shortfall, meaning the difference between what you should have taken and what you actually took.⁶ Miss $20,000 and the penalty alone is $5,000, on top of the income tax owed when the money eventually comes out.

The tax drops to 10% if you correct the shortfall within the correction window, which runs from the date the tax is imposed through the end of the second taxable year after the year the penalty applies.⁶ A 2025 miss can generally be cleaned up by the end of 2027 at the reduced rate.

Report the penalty on IRS Form 5329 with your tax return.⁷ If the shortfall came from a genuine error, such as a plan administrator’s processing delay or a medical emergency, you can request that the IRS waive the penalty entirely. Attach a written explanation to Form 5329 describing what happened and the corrective steps you took. The IRS grants these waivers regularly when the facts show reasonable cause and a prompt fix.²

RMDs After the Owner’s Death

A surviving spouse has the most flexibility. A spouse beneficiary can treat the inherited 403(b) as their own, roll it into their own IRA or retirement plan, or take distributions over their own life expectancy.⁸ Treating it as their own resets the RMD clock to their own required beginning date.

A limited set of other beneficiaries, called eligible designated beneficiaries, can still stretch distributions over their life expectancy: a minor child of the owner (with the 10-year rule kicking in at majority), a disabled or chronically ill individual, and a beneficiary not more than 10 years younger than the owner.⁸

Every other beneficiary falls under the 10-year rule from the SECURE Act. The inherited account must be emptied by December 31 of the 10th year after the owner’s death. When the owner died after the required beginning date, the beneficiary also has to take annual distributions in years one through nine, with the balance out in year 10.⁹ If the owner died before the required beginning date, no annual distributions are required — just the full withdrawal by the end of year 10.

1
Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
2
Internal Revenue Service. Retirement Topics – Required Minimum Distributions (RMDs)
3
Internal Revenue Service. RMD Comparison Chart IRAs vs. Defined Contribution Plans
4
U.S. Senate HELP Committee. SECURE 2.0 Section by Section
5
Congressional Research Service. Qualified Charitable Distributions from Individual Retirement Accounts
6
Office of the Law Revision Counsel. 26 USC 4974 – Excise Tax on Certain Accumulations in Qualified Retirement Plans
7
Internal Revenue Service. About Form 5329 – Additional Taxes on Qualified Plans
8
Internal Revenue Service. Retirement Topics – Beneficiary
9
Internal Revenue Service. Notice 2024-35 – Certain Required Minimum Distributions